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Bankruptcy, Delinquency and Debt after the 2005 Bankruptcy Law

Jaromir Nosal and Stefania Albanesi ()

No 740, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: Using a comprehensive panel dataset on U.S. households, we study the effects of the 2005 bankruptcy reform on bankruptcy, delinquency and debt accumulation. We find that the reform coincided with a 23% permanent drop in the bankruptcy rate relative to pre-reform level. We further document that the non-filing individuals are shifting into being persistently derogatory, which may induce additional economic strain on these households. Moreover, we show that the drop in bankruptcy and rise in delinquency is concentrated among non-homeowners and individuals with low prior credit scores, which suggests that the well documented rise in filing cost may be responsible for these patterns.

Date: 2014
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